This story originally appeared on Inside Energy.
The most recent auction took place May 5 at the state capitol in Bismarck. The room was filled with about 40 men in solid-color polo shirts. They work as brokers for oil companies, bidding on their behalf. My guide for the day was Tom Gray, a landman from Texas who’s been working in the Bakken since 2009. He’s old enough to be my grandfather, and wore a blue sport coat with gold buttons that smelled faintly of mothballs. He was really excited about being on the radio, and took a bunch of selfies with me before getting down to business.
“Let me show you what we’re doing today,” he said, unfolding a map of the Bakken.
Gray had drawn lines with a pink highlighter around areas that were up for bid. Before oil companies can start drilling on state lands, they need to sign a lease with the state. And before that, they need to out-bid everyone else in this room for the right to drill. It’s called a bonus: a one-time, per-acre payment that’s like a big thank you to North Dakota for allowing drilling on state lands.
A mineral auction is like a game of sedentary ping pong. When a parcel of interest appears on the screen, the landmen catch the eye of the auctioneer by lifting their finger or flicking a pen, and the bid bounces back and forth across the room.
Gray was bidding on a few parcels in McKenzie County, the heart of the Bakken. When the parcel came up, he called his client on the phone and adjusted his Bluetooth. At $725 an acre, he raised his arm. But the bidding quickly rose well above $1000, more than Gray’s client wanted to pay. So he shook his head and backed out. The bonus ended up going for $1050 an acre.
When the auctioneer finally brought bidding to a close a few hours later, the state had taken in about $1.8 million in bonus payments — about eight times less than the auction in May of last year. With low oil prices, companies aren’t making as much on the oil they sell, so they have less money to spend on new leases and bonuses. And it’s not just North Dakota — Wyoming also recently had its most disappointing federal mineral auction since the Great Recession.